2020 Georgia Code
Title 14 - Corporations, Partnerships, and Associations
Chapter 2 - Business Corporations
Article 8 - Directors and Officers
Part 1 - Board of Directors
§ 14-2-808. Removal of Directors by Shareholders

1. The shareholders may remove one or more directors with or without cause unless the articles of incorporation or a bylaw adopted by the shareholders provides that directors may be removed only for cause.
2. If a director is elected by a voting group of shareholders, only the shareholders of that voting group may participate in the vote to remove him.
3. If cumulative voting is authorized, a director may not be removed if the number of votes sufficient to elect him under cumulative voting is voted against his removal. If cumulative voting is not authorized, a director may be removed only by a majority of the votes entitled to be cast.
4. If the directors have staggered terms as provided in Code Section 14-2-806, directors may be removed only for cause, unless the articles of incorporation or a bylaw adopted by the shareholders provides otherwise.
5. A director may be removed by the shareholders only at a meeting called for the purpose of removing him and the meeting notice must state that the purpose, or one of the purposes, of the meeting is removal of the director.

(Code 1981, §14-2-808, enacted by Ga. L. 1988, p. 1070, § 1.)

- For article, "The Dynamics Among Shareholders, Directors, and Officers in Corporate Organizations Under Georgia Law," see 37 Mercer L. Rev. 79 (1985). For article, "Some Distinctive Features of the Georgia Business Corporation Code," 28 Ga. St. B.J. 101 (1991).

Source: Model Act, § 8.08. This replaces provisions formerly found in § 14-2-145.

Subsection (a) accepts the view that since the shareholders are the owners of the corporation, they should normally have the power to change the directors at will. This section reverses the common law position that directors have a statutory entitlement to their office and can be removed only for cause - fraud, criminal conduct, gross abuse of office amounting to a breach of trust, or similar misconduct. The power to remove directors is subject to several restrictions set forth in Section14-2-808. First is the power of the shareholders to restrict their own power to removal for cause. This is an addition to § 14-2-145(a) which failed to mention the ability of shareholders to impose limits on their own power to remove directors. This strengthens bargains over the allocation of power in close corporations.

Subsection (b) provides that if the articles of incorporation provide that one or more classes of shares constitute a separate voting group entitled to elect a director (see Section 14-2-804), only the shareholders of that voting group may participate in the vote whether or not to remove that director.

Subsection (c) departs from the Model Act and specifies that where cumulative voting is not in effect the vote required to remove a director is a majority of the votes entitled to be cast, rather than the plurality provided by the Model Act. This follows former § 14-2-145. If cumulative voting is authorized, a director may be removed (with or without cause) only if the votes cast in favor of retaining him would not have been sufficient to elect him pursuant to cumulative voting at that meeting. This provision guarantees that a minority faction with sufficient votes to guarantee the election of a director under cumulative voting will be able to protect that director from removal by the remaining shareholders. In computing whether or not a director elected by cumulative voting is protected from removal from office by subsection (d), the votes should be counted as though (1) the vote to remove the director occurred in an election to elect the number of directors normally elected by the voting group along with the director whose removal is sought, (2) the number of votes cast cumulatively against removal of the director had been cast for his election, and (3) all votes cast for removal of the director had been cast cumulatively in an efficient pattern for the election of a sufficient number of candidates so as to deprive the director whose removal is being sought of his office.

Subsection (d) was added from Del. Code Ann. tit. 8, § 141(k)(1), and restricts removal of members of a staggered board to removal for cause, unless the articles or a bylaw adopted by the shareholders provides otherwise. Classified boards, like cumulatively elected boards, are a means of allocating power, and those arrangements normally should not be subject to disruption unless the shareholders have consented to removal without cause in the articles of incorporation.

Subsection (e) requires the meeting notice for meetings called for the purpose of removal of directors to state that removal of specific directors will be proposed. This prevents surprise.

Former Section 14-2-145(d) provided that new directors could be elected at the same meeting at which old directors were removed. There is no counterpart to this in the Code. This power is nevertheless implicit in Sections 14-2-809 [repealed] and 810, and there is no intent to reverse the former rule.

Cross-References Articles of incorporation, see § 14-2-202 and Article 10, Part 1. Cumulative voting, see § 14-2-728. Director standards of conduct, see §§ 14-2-830 &14-2-831. Election by voting group of shareholders, see § 14-2-804. Election of directors generally, see § 14-2-728. Meeting notice, see § 14-2-705. Quorum for voting group, see § 14-2-725. Shareholders' meetings, see § 14-2-701 et seq. "Voting group" defined, § 14-2-140. Voting by shareholders, see § 14-2-726.

RESEARCH REFERENCES

Am. Jur. 2d.

- 18B Am. Jur. 2d, Corporations, § 1222 et seq.

- 19 C.J.S., Corporations, § 539 et seq.

- Removal by court of director or officer of private corporation, 124 A.L.R. 364.

Right of corporate officer to recover compensation for time period between original improper discharge and a subsequent legal discharge, 82 A.L.R.2d 965.

Validity of agreement in conjunction with sale of corporate shares that majority of directors will be replaced by purchaser's designees, 13 A.L.R.3d 361.